Magazine

Now Who'll Save Hewlett-Packard?


They were two young Stanford University graduates -- one a dyslexic technical genius, the other a star athlete from a hardscrabble Colorado town. They set up shop in a one-car garage in 1938 and built a Silicon Valley icon, Hewlett-Packard Co. (HPQ), an innovation machine that pioneered radar, computers, and other digital wonders.

She was the most popular and powerful businesswoman of her time, a brilliant salesperson, convinced she could help rescue the company that had lost its way. William R. Hewlett and David Packard were as modest as Carleton S. Fiorina is flashy, as tech-driven as she is market-focused. Of all the errors made in Fiorina's six-year tenure as CEO of HP, none is perhaps as important as the notion that an outsider with values and skills vastly different from those of HP's founders could revive a company with a culture that so embodied their engineering-driven personalities.

Yes, of course, Louis V. Gerstner Jr. did just that with IBM (IBM). A marketing specialist from outside the computer industry, he rescued another declining digital behemoth by defying calls from Wall Street to split up the company to release shareholder value. But Carly was no Lou. He had gained the respect and loyalty of IBMers early by going to the IBM Research labs upon taking office, recognizing and celebrating IBM's core technology culture. Carly was never able to win the loyalty of HP's employees, who mostly resented and resisted her until the day she was ousted by the board of directors.

Gerstner was also totally in control. He may have ruled by fear, but he spent his first three years fixing the plumbing of IBM, and in the end he was in control of its operating units. Carly tried her hand at reorganization, but it never really worked. HP's board felt that she wasn't good enough at operations, and Carly stubbornly refused to hire a chief operating officer.

Gerstner disparaged the "vision thing," yet he created a powerful, overarching strategy for IBM -- one that moved the company up to high-end services. He sold IBM's technical abilities as solutions to Corporate America's info tech problems. Fiorina's strategy of merging with a low-end computer maker, Compaq, failed to create a focused strategy for HP. She tried to serve too many customers in too many markets: consumer electronics, commodity PCs, high-valued enterprise businesses, and, of course, printing. In the end, IBM dominated high-end computer services, Dell Inc. (DELL) controlled low-end PCs, and only HP's printing operation made real profits. Faced with new competition from Dell, even printing is now under fire. The merger with Compaq, while executed smoothly by Fiorina, never delivered on raising margins or profits.

Which is what Walter Hewlett, the eldest son of founder William Hewlett, predicted when he fought Fiorina's purchase of Compaq in 2002. He rallied the descendants of both founding families -- and the shares they controlled personally and through foundations -- in the failed proxy battle. The board asked him to leave for his efforts. Perhaps it should ask him back. Carly was hired to help revive a flagging high-tech pioneer. Someone still needs to save HP.


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus